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Nov 07, 2022 / 15:54

FDI companies show strong commitments in Vietnam

Vietnam remains an appealing option for investors looking to diversify their supply chains.

Actual FDI to Vietnam during the first 10 months of 2022 rose by a five-year high of US$17.45 billion, a 15.2% year-on-year increase, showing the strong commitments of foreign-invested companies to the country.

Attractive destination for FDI

On November 3, 2022, LEGO Group held a groundbreaking ceremony for its $1-billion factory in the Southern province of Binh Duong. This is the Danish Group’s sixth factory in the world, the second in Asia, but the first carbon-neutral, so many expect it to start a new wave of green FDI capital in Vietnam in the future.

 LEGO's groundbreaking ceremony for its $1 billion factory in Binh Duong. File photo

At the ceremony, LEGO CEO Niels B.Christiansen said the factory in Binh Duong would help strengthen its long-term development strategy in Asia and diversify the supply chains worldwide.

LEGO’s factory was not the only large-scale FDI project in Vietnam during the first 10 months of this year.

Other notable names include the upgrading of Samsung Electro-Mechanics' Thai Nguyen plant, which in February received an additional injection of $920 million, bringing total investment capital in the plant to more than $2.27 billion. In June, the South Korean conglomerate poured another $841 million into the Samsung Electronics HCMC CE complex in Ho Chi Minh City, while other investors have also committed respective investment capital of $306 million, $260 million and $127 million in different electronics manufacturing plants in Bac Ninh, Nghe An and Haiphong provinces/cities.

Figures released by the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment noted total FDI commitments to Vietnam as of October 20 reached $22.46 billion, down 5.4% year on year.

According to the FIA, the figure, albeit still low compared to the same period of last year, narrowed the decline of 15.3% year on year from the 9-month period.

In contrast, the disbursed amount of FDI to Vietnam in the first ten months rose by 15.2% to $17.45 billion.

The FIA noted the actual figure could reach around $21-22 billion for 2022, representing an increase of 6.4-11.5%.

“This is an implication for the confidence of foreign investors in Vietnam’s investment environment and the economic outlook,” noted the agency.

EuroCham Chairman Alain Cany also highlighted the attractiveness of the country as an investment destination despite a challenging global economic environment.

 The design of Samsung's upcoming R&D research in Hanoi. 

“I can see that in the investors' minds, Vietnam has become not only a country of cheap labor but a country for sustainability, development, and investment,” Cany told The Hanoi Times.

Cany’s view was echoed by Secretary-General of the OECD Mathias Cormann, who considered Vietnam  an appealing option for foreign investors to diversify regional and global supply chains.

The latest Business Climate Index (BCI) from EuroCham showed 42% of European companies expect to expand their investment in Vietnam in late 2022.

During his trip to Vietnam in late October, Cormann noted Vietnam has become a bright spot in a dim global economic picture, thanks to adequate infrastructure, a friendly business environment, and success in Covid-19 control.

He anticipated that the Vietnamese economy will continue its upward trend in the coming times, with his own forecast of the country's GDP above 6% in 2022 and beyond.

This encouraging performance, according to Cormann, would come from the positive foreign capital inflows, as businesses from OECD members come to Vietnam to diversify their supply chains.

Attracting green capital

A quick survey jointly conducted by MPI and the Vietnam Business Forum (VBF) in September revealed that more than 90% of companies with FDI in Vietnam remained optimistic about their operations and would commit to doing business here in the long term, while 66% expect to expand investment by 2023.

In recent years, the Vietnamese government has changed its FDI attraction policy to focus on high-tech, innovative and environmentally friendly projects, especially those that could bolster the participation of Vietnamese companies in value chains, and promote a digital, green and circular economy for sustainable development.

Former Ambassador of Denmark to Vietnam Kim Højlund Christensen noted the Embassy is supporting Danish companies in various fields looking for business opportunities in Vietnam.

Christensen noted a similarity among those is a priority for green operation, which is aligned with Vietnam’s long-term commitment to net zero carbon emission by 2050.

He referred to the La Gan offshore wind project featuring the Copenhagen Infrastructure Partners with a capacity of 3.5GW and investment capital of $10.5 billion in Binh Thuan.

The project is set to provide electricity for seven million households per year and help Vietnam cut 130 million tons of carbon dioxide emission during the project’s operational cycle, he added.

Last year, Denmark-based Orsted Corporation signed an agreement with Vietnam’s T&T Group to establish a joint venture for the implementation of offshore wind projects in Vietnam in the coming years.

According to experts, along with economic development, investors are paying more attention to green growth and would look for countries with a similar vision.

Minister of Planning and Investment Nguyen Chi Dung said the country is taking preparation measures in both human resources and technologies to grasp opportunities from new global investment trend.

“To encourage long-term investment and high-quality projects, the Government is willing to offer attractive incentives, and also focuses on improving the business environment with simplified administrative procedures,” Dung said.

In October, Hanoi attracted 21 FDI projects with a total investment capital of $2.7 million, while 22 existing projects have seen an injection of $237.1 million, and foreign investors contributed $20 million to 30 projects.

Overall, over the ten months, the city attracted $1.28 billion FDI, a surge of 27% year on year.

The municipal Department of Planning and Investment noted the city plans to draw investment capital from major markets such as Japan, South Korea, Singapore, Taiwan (China), China, the US, and Europe.

In line with such an effort, Hanoi would continue to invest in infrastructure development and training a high-quality workforce to meet rising demand from foreign investors.